Japanese companies agreed to raise wages by an average of 5.20 per cent this year, marking the highest increase in 33 years, Reuters reported on Thursday, citing country's largest union group Rengo. This news comes after the fourth round of annual labour negotiations, known as shunto, concluded on Thursday. The shunto outcome is a critical indicator for consumer spending and inflation. It also plays a significant role in the Bank of Japan's (BOJ) policy decisions, particularly following their recent move to abandon negative interest rates. The trend of rising wages is undeniably established, Rengo declared in a statement. They further noted that this year's raises are the largest since they began collecting comparable data in 2013. Both the BOJ Governor and the Prime Minister agree: higher wages and a little more inflation are key to getting Japan's economy back on track after decades of low prices and slow growth. This significant pay rise for Japanese workers has the potential to boost consumer spending and contribute to a more stable inflationary environment. It remains to be seen how this development will influence future central bank policies as they strive to normalise monetary conditions.
